I have identified four primary sources of the rise in costs - the impact of medical research (2/26/10), restrictive entry into medical schools causing anti competitive pricing (3/2/10), an over insured population (3/5/10), and tort law suits (3/9/10). These four issues must be addressed in order to contain health costs. Here are the components of the Stabler Health Cost Reduction Plan:
1. Medical schools must reorganize their teaching methods, particularly in the clinical programs, and use their impressive resources more efficiently in order to double or triple the number of doctors produced each year. If medical educators really put their mind to the project, I suspect that the additional tuition income would come close to covering the marginal costs of educating additional students. The economic savings coming from increased enrollments would significantly reduce costs, increase the availability of medical services and thus produce a far superior health care system.
2. I propose to limit tax deductible plans to those that pay no more than 80% of the ordinary medical costs with a 20% deductible paid by the insured. I believe that in most cases the cumulative savings from lower premiums would exceed the cost of paying the larger deductible. With low cost plans being the norm, universal coverage would be much easier to accomplish.. Moreover, the patient who has a 20% stake in the cost of medical services will pay much closer attention to how the money is spent. The Stabler Plan would allow greater, but not 100%, coverage for catastrophic expenses and would provide some sort of welfare payments for the indigent.
3. It is doubtful that the pace of medical research will ever happen, nor should it. The only way I can see that its effect on medical costs can be reduced would be to invest more public moneys into research to replace the work of pharmaceutical and medical equipment companies. Public investments do not need to be recovered out of the proceeds of sales. Nevertheless, the savings, if any, from that source would require much more investigation and study that I am capable of producing.
4. I see little prospect of material cost reduction coming out of tort reform as long as health care is dispensed in a noncompetitive environment. Therefore, the Stabler Plan requires that the supply of doctors and other health professions be dramatically increased before tort reform is included in the program. (See my discussion in the posting issued on 3/5/10). It would be unconscionable to give the doctors full immunity from the consequences of their tortious actions. Two features of tort reform have merit, however. Punitive damages deserve to be curbed, or even abolished. I believe that it is the province of the criminal laws to mete out punishment. The proper role of civil law suits is to compensate victims for their loss. Second, tort laws could be amended to give the medical professionals a good faith defense. Most medical procedures have a risk attached to them. The defendant who can prove that he or she acted in good faith and with diligence should be given a break.
Showing posts with label Health Care Reform. Show all posts
Showing posts with label Health Care Reform. Show all posts
Thursday, March 18, 2010
Friday, February 26, 2010
Why do health costs go up? -- Research
I have previously pointed out that economic regulation will ineffective in holding down health costs. Before addressing how to contain costs, discourse should begin by exploring why costs are so high. I do not pretend to have all the answers. Nevertheless there are several obvious sources of high health costs that I will explore in this and other blogs. We will start with the impact of medical research.
Much is made of the shortfalls in our investment in science and technology. That cannot be said about medical research. I doubt the world has ever seen an explosion of medical advances like those which have occurred in my lifetime. I hear it said that the quality of care in this country is not superior to other countries. That may be true, but I find it hard to believe. Every day I see myself and others who have escaped the grim reaper because of leading edge medicine.
When I was young, my father suffered from a thyroid condition that the doctors could not diagnose for two years. He almost died because of the delay. Today standard blood tests routinely identify thyroid abnormalities. My mother died of breast cancer that would be picked up in a regularly scheduled mammogram today. My brother in law died of heart attack that would have been corrected by open heart surgery today. Two aunts were institutionalized for conditions that would now be controlled by drugs. On the other hand, my prostate operation came in time to spare me of the ravages of cancer because of the PSA test which is regularly administered on a yearly basis to middle aged males. My gall bladder operation that required a three and a half hour stay in the hospital and about a twelve hour recuperation was once a dreaded massive operation that could send the patient to bed for months with a scar that stretched across the torso..
These stories are not unique. Our life expectancies are expanded because of massive investments, public and private, into medical research over the previous decades. Nevertheless, inventions carry their costs. When a new medicine is developed, its inventor receives a legal monopoly for a specified period of time. The FDA must allow the pharmaceutical company to recover its research costs of developing that drug. These companies must also recoup the costs attributable to exploratory research that did not result in producing a marketable drug. Otherwise the enterprise cannot sustain itself.
Moreover when a drug, device or procedure is invented, the costs must often be recovered out sales in a relatively small market. An MRI machine for instance can only be sold to a handful of hospitals and other diagnostic centers. You cannot sell MRI machines like automobiles that fill up two car garages.
Some demagogues argue that those costs can be avoided by letting the government control all medical research thereby eliminating “excess profits.” Don’t believe it. The costs described above exist regardless of who may bear them. If the government does not receive enough return for its investment to cover the successful and unsuccessful research as well as the cost of raising the necessary capital, then it must absorb the costs and charge us to make up the loss costs either by taxing us or borrowing the money from somebody, probably the Chinese. We are getting a full dose nowadays of the dangers of that tactic.
The costs of research are vividly revealed when our favorite medicine becomes generic and the research costs are no longer a factor. Our insurance companies have educated us to the fact that generic drugs are the same medicine at drastically reduced prices, simply because the influence of research costs on the price of medicine has ended.
Under any circumstances, I doubt that our appetite for medical innovation is waning. I do not believe that we, the consumers, will tolerate a reduction in medical research, particularly with respect to the ailment that affects us or our families. Moreover, I would not be surprised if the recoverable costs actually increase as the drugs and devices brought onto the market become more specialized treating fewer patients a thereby creating ever smaller markets for the products.
In my next blog, I will discuss American medical education and how it contributes to higher costs.
Much is made of the shortfalls in our investment in science and technology. That cannot be said about medical research. I doubt the world has ever seen an explosion of medical advances like those which have occurred in my lifetime. I hear it said that the quality of care in this country is not superior to other countries. That may be true, but I find it hard to believe. Every day I see myself and others who have escaped the grim reaper because of leading edge medicine.
When I was young, my father suffered from a thyroid condition that the doctors could not diagnose for two years. He almost died because of the delay. Today standard blood tests routinely identify thyroid abnormalities. My mother died of breast cancer that would be picked up in a regularly scheduled mammogram today. My brother in law died of heart attack that would have been corrected by open heart surgery today. Two aunts were institutionalized for conditions that would now be controlled by drugs. On the other hand, my prostate operation came in time to spare me of the ravages of cancer because of the PSA test which is regularly administered on a yearly basis to middle aged males. My gall bladder operation that required a three and a half hour stay in the hospital and about a twelve hour recuperation was once a dreaded massive operation that could send the patient to bed for months with a scar that stretched across the torso..
These stories are not unique. Our life expectancies are expanded because of massive investments, public and private, into medical research over the previous decades. Nevertheless, inventions carry their costs. When a new medicine is developed, its inventor receives a legal monopoly for a specified period of time. The FDA must allow the pharmaceutical company to recover its research costs of developing that drug. These companies must also recoup the costs attributable to exploratory research that did not result in producing a marketable drug. Otherwise the enterprise cannot sustain itself.
Moreover when a drug, device or procedure is invented, the costs must often be recovered out sales in a relatively small market. An MRI machine for instance can only be sold to a handful of hospitals and other diagnostic centers. You cannot sell MRI machines like automobiles that fill up two car garages.
Some demagogues argue that those costs can be avoided by letting the government control all medical research thereby eliminating “excess profits.” Don’t believe it. The costs described above exist regardless of who may bear them. If the government does not receive enough return for its investment to cover the successful and unsuccessful research as well as the cost of raising the necessary capital, then it must absorb the costs and charge us to make up the loss costs either by taxing us or borrowing the money from somebody, probably the Chinese. We are getting a full dose nowadays of the dangers of that tactic.
The costs of research are vividly revealed when our favorite medicine becomes generic and the research costs are no longer a factor. Our insurance companies have educated us to the fact that generic drugs are the same medicine at drastically reduced prices, simply because the influence of research costs on the price of medicine has ended.
Under any circumstances, I doubt that our appetite for medical innovation is waning. I do not believe that we, the consumers, will tolerate a reduction in medical research, particularly with respect to the ailment that affects us or our families. Moreover, I would not be surprised if the recoverable costs actually increase as the drugs and devices brought onto the market become more specialized treating fewer patients a thereby creating ever smaller markets for the products.
In my next blog, I will discuss American medical education and how it contributes to higher costs.
Tuesday, February 9, 2010
Breaking News - President Obama’s News Conference
I have just heard Obama’s news conference concerning his meeting with Congressional leaders from both parties. It was, in my judgment, a watershed event
Obama seems to be doing all the things he should done a year ago. He stated that the country cannot endure another year of wrangling over health care. He called on the leaders to find those parts on which they can reach agreement.. In addition he indicated a willingness to horse trade on the issues which are the sacred cows of both parties.
He must have been persuasive because the Republican leaders hinted that they are willing to participate in the process.
He also took a middle position on the energy policy. He said that both sides must recognize that there is a need for expanding our use of carbon fuels to satisfy the needs for the short run and for research and development of “clean” sources of energy, particularly for the long run. I believe that his position will resonate well in Congress and in the country.
I view that this new position towards compromise and accommodation may reverse the downward trent of hyper-partisanship and that the country will benefit from it.
What has happened to bring about a change of heart? We certainly can thank the people of Massachusetts who sent a welcome wake up call to Washington. Another possibility has not been mentioned anywhere to my knowledge. Obviously President Obama read, studied and understood the message contained in Mainlineexpress.blogpot.com last week!
Obama seems to be doing all the things he should done a year ago. He stated that the country cannot endure another year of wrangling over health care. He called on the leaders to find those parts on which they can reach agreement.. In addition he indicated a willingness to horse trade on the issues which are the sacred cows of both parties.
He must have been persuasive because the Republican leaders hinted that they are willing to participate in the process.
He also took a middle position on the energy policy. He said that both sides must recognize that there is a need for expanding our use of carbon fuels to satisfy the needs for the short run and for research and development of “clean” sources of energy, particularly for the long run. I believe that his position will resonate well in Congress and in the country.
I view that this new position towards compromise and accommodation may reverse the downward trent of hyper-partisanship and that the country will benefit from it.
What has happened to bring about a change of heart? We certainly can thank the people of Massachusetts who sent a welcome wake up call to Washington. Another possibility has not been mentioned anywhere to my knowledge. Obviously President Obama read, studied and understood the message contained in Mainlineexpress.blogpot.com last week!
Tuesday, February 2, 2010
The Failing Health Care Reform Bill II- Overreaching Legislation.
The Democrats should have learned from Clinton’s experience that it is extremely difficult to adopt an comprehensive plan covering various subjects, all at the same time. One constituency may be concerned about by an isolated portion of the plan, but their best strategy is to oppose the entire package. Another segment may have entirely different concerns but they join in opposition in order to prevent their own interests from being adversely affected. Thus two groups with different interests combine to constitute a more formidable opposition.
That phenomenon is apparent in the case of health reform. Obama expressed shock that the insurance companies invested so much in their lobbying activities. Why not? Proposals such as the public option and single payer government insurance threatened their existence. I already mentioned the unions who suddenly became disaffected with the new taxes being assessed on the health plans they have proudly negotiated over the years.. The Medicare generation, which was betrayed by the NAARP, does not believe that their benefits will be secure. Even those who are approaching 65 have been hearing that they will not receive all the benefits now included in Medicare. Even the issue of the deficits is tied to self interest. Three quarters of the population are happy with the insurance they now have. Most likely they see the plan as a trillion dollar boondoggle for the benefit of some one other than themselves.
Clinton made the same mistake as Obama in attempting to take too big a bite at the apple, but he quickly retreated. If the Clintons had successfully sponsored a less ambitious plan, Obama could have built on what had been done and the Democrats might have had a significant trophy in their cabinet.
Sometimes overlooked is the fact that the most significant health care reform actually enacted was proposed by George W. Bush, who procured prescription drug benefits for the elderly. It certainly was not comprehensive, but it survived the scrutiny of a contentious congress.
Instead all the Democrats have done is generate a lot of hot air and, so far, have nothing to show for their work.
That phenomenon is apparent in the case of health reform. Obama expressed shock that the insurance companies invested so much in their lobbying activities. Why not? Proposals such as the public option and single payer government insurance threatened their existence. I already mentioned the unions who suddenly became disaffected with the new taxes being assessed on the health plans they have proudly negotiated over the years.. The Medicare generation, which was betrayed by the NAARP, does not believe that their benefits will be secure. Even those who are approaching 65 have been hearing that they will not receive all the benefits now included in Medicare. Even the issue of the deficits is tied to self interest. Three quarters of the population are happy with the insurance they now have. Most likely they see the plan as a trillion dollar boondoggle for the benefit of some one other than themselves.
Clinton made the same mistake as Obama in attempting to take too big a bite at the apple, but he quickly retreated. If the Clintons had successfully sponsored a less ambitious plan, Obama could have built on what had been done and the Democrats might have had a significant trophy in their cabinet.
Sometimes overlooked is the fact that the most significant health care reform actually enacted was proposed by George W. Bush, who procured prescription drug benefits for the elderly. It certainly was not comprehensive, but it survived the scrutiny of a contentious congress.
Instead all the Democrats have done is generate a lot of hot air and, so far, have nothing to show for their work.
Monday, February 1, 2010
The Failing Health Care Reform Bill I - Who is to blame?
Obama and his party have a debacle on their hands.. They have fiddled with health care reform for an entire year, while more important issues remained unresolved. The Democrats have managed their razor thin majority in the Senate with the sophistication and finesse of a mafia hit man. Now that they have been caught making all the wrong choices, it is time to look for scapegoats.
The media has tended to look for parallels with the first years of the Reagan and Clinton. Both presidents escaped largely unharmed from their early failures. I believe that the Jimmy Carter years may be more apt. Carter had a strong mandate with a convincing victory over Gerald Ford and control of both houses. It appeared that the way was clear for the Democratic juggernaut to restore the New Deal. In fact they squabbled so much that very little was accomplished. The economy went south, and Carter ended up with a one term presidency.
The stunning defeat in Massachusetts now leaves the Democrats in limbo with a few choices that are all distasteful to them.
Abandoning the health care effort will make them look like the gang that cannot shoot straight.
Starting over again, as the Republicans smugly suggest, would take at least another six months. Neither the Congress, which is facing an uncomfortable election, nor the country will tolerate more of the endless bickering and stalemate.
The only viable choice would be for the House of Representative to adopt what the Senate already passed without changes. In that case, they would avoid the necessity of coming back to the Senate where the Republicans are armed with their forty first vote. The problem is that the Senate bill includes terms that the left wing Democrats deem to be abominable, such as restrictions on funding abortions and taxing the so-called Cadillac plans which are largely established through union collective bargaining agreements.
How did they get into the mess? I have three major suggestions, which will be discussed separately over the next three days. I hope you will join me.
The media has tended to look for parallels with the first years of the Reagan and Clinton. Both presidents escaped largely unharmed from their early failures. I believe that the Jimmy Carter years may be more apt. Carter had a strong mandate with a convincing victory over Gerald Ford and control of both houses. It appeared that the way was clear for the Democratic juggernaut to restore the New Deal. In fact they squabbled so much that very little was accomplished. The economy went south, and Carter ended up with a one term presidency.
The stunning defeat in Massachusetts now leaves the Democrats in limbo with a few choices that are all distasteful to them.
Abandoning the health care effort will make them look like the gang that cannot shoot straight.
Starting over again, as the Republicans smugly suggest, would take at least another six months. Neither the Congress, which is facing an uncomfortable election, nor the country will tolerate more of the endless bickering and stalemate.
The only viable choice would be for the House of Representative to adopt what the Senate already passed without changes. In that case, they would avoid the necessity of coming back to the Senate where the Republicans are armed with their forty first vote. The problem is that the Senate bill includes terms that the left wing Democrats deem to be abominable, such as restrictions on funding abortions and taxing the so-called Cadillac plans which are largely established through union collective bargaining agreements.
How did they get into the mess? I have three major suggestions, which will be discussed separately over the next three days. I hope you will join me.
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